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Senate Republicans Band Together in Opposing Financial Bill

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Senate Republicans Band Together in Opposing Financial Bill

By David M. Herszenhorn April 16, 2010 7:34 pmApril 16, 2010 7:34 pm

Updated: All 41 Senate Republicans have signed a letter urging the majority leader, Senator Harry Reid, Democrat of Nevada, to adopt a more bipartisan approach in developing legislation to tighten regulation of the nation’s financial system.

The letter enraged Democrats, who noted that Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, had spent months working with Republicans and trying to get their cooperation on the bill.

The Republicans’ letter did not explicitly threaten to block the bill from coming to the floor for debate, but senior Republican aides said that was the underlying message.

Senator Susan Collins, Republican of Maine, who had expressed some reluctance about preventing the debate from getting under way, said that she was in fact prepared to help filibuster it and stop it from reaching the floor unless the Democrats agreed to changes.

In recent days, the Senate Republican leader, Mitch McConnell of Kentucky, has criticized the legislation as encouraging, rather than preventing, future taxpayer bailouts of failing financial firms.

But even some Republicans concede that the legislation, as written, was intended specifically to prevent such bailouts in the future. For instance, Senator Bob Corker, Republican of Tennessee, who helped draft the bill, has said that it contains some “loopholes” that could be fixed with ease.

“We encourage you to take a bipartisan and inclusive approach, rather than the partisan path you chose on health care,” the Republicans wrote in their letter to Mr. Reid. They added, “We are united in our opposition to the partisan legislation reported by the Senate Banking Committee. As currently constructed, this bill allows for endless taxpayer bailouts of Wall Street and establishes new and unlimited regulatory powers that will stifle small businesses and community banks.”

In response, Democrats stepped up their efforts to portray the Republicans as doing the bidding of Wall Street banks. The aggressive pushback came from the Capitol, from the White House and the Democratic National Committee.

Mr. Dodd gave two lengthy speeches on the Senate floor this week, angrily swatting back the Republican charges of a lack of bipartisanship. Mr. Dodd worked for months with Republicans on banking committee, including Mr. Corker, in developing the legislation.

Despite those efforts, the committee approved the bill last month on a strict party-line vote, with all Republicans opposed. Just before the committee vote, Senator Richard C. Shelby of Alabama, the senior Republican on the panel, withdrew hundreds of amendments that Republicans had proposed to the bill.

At the time, that move seemed intended to shift the action to the Senate floor, where Republicans would control enough votes to filibuster the bill. On the committee, the Democrats easily could have defeated the Republican amendments.

The move also seemed intended to keep Mr. McConnell largely in control of the negotiations with Senate Democrats and the Obama administration.

But while Republicans have enough votes to block the Democrats’ bill, they do not have enough votes to win approval of their amendments, which is why they are fighting so hard to make changes to the bill before the start of formal debate. Unless Senate Democratic leaders and the White House agree to include changes that the Republicans are demanding.

Mr. Corker, in an interview on Thursday, said that Republicans had withdrawn their amendments only on the promise that a bipartisan agreement would be reached before the bill was brought to the floor. But in a separate interview, Mr. Shelby said that Republicans had made the decision to withdraw the amendments on their own, without any assurances from Mr. Dodd or the Democrats.

Mr. McConnell apparently confronted some difficulty in seeking to obtain the signatures of all 41 Republicans on a letter opposing the bill. With public anger at Wall Street running high, many Republicans have expressed concern about any appearance that they are siding with big banks over Main Street.

Mr. McConnell has framed the Republican opposition as an attempt to prevent future bailouts, and has specifically criticized a $50 billion fund, to be created with a tax on banks, that would help cover the costs of dealing with failing firms in the future. Mr. McConnell said the mere existence of the fund is an invitation to banks to take on risk that could lead them to fail. The White House does not support the fund, which is being pushed by Congressional Democrats.

Democrats have countered that the fund is intended pay for dismantling such firms and putting them out of business – and that setting up in advance would help ensure that the financial industry, rather than taxpayers, would cover the expense of future failures.

In the letter, the Republicans continued to focus on the need to prevent future bailouts. “We simply cannot ask the American taxpayer to continue to subsidize this ‘too big to fail’ policy,” they wrote. “We must ensure that Wall Street no longer believes or relies on Main Street to bail them out. Inaction is not an option. However, it is imperative that what we do does not worsen the current economic climate or codify the circumstances that led to the last financial crisis.”

Some Republicans have accused the White House of interfering with negotiations among senators on the banking committee and the Agriculture Committee, which has jurisdiction over the Commodities Futures Trading Commission, which in turn regulates financial instruments known as derivatives.

“We urge you to support the bipartisan negotiations by the Banking and Agriculture Committees,” the Republicans wrote in their letter. “We are confident that the Senate can overcome political tensions and provide a bipartisan approach to financial reform this year.”

Senators on both sides say that an agreement will likely be reached. But the Republicans may be looking to prolong the process, using up time that Democrats might use for other issues. It is a strategy that Mr. McConnell has engaged in – with substantial success – since the Democrats won an expanded majority in 2008.

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